The Trump administration could soon be making good on a promise made last year to withdraw from the Universal Postal Union (UPU) – an international agency that coordinates postal services worldwide.
The target of the move, however, is not the agency itself – but China, and it comes as part of the ongoing trade war between the United States and the country.
President Trump’s gripe with the UPU, a system that allows for shipping of packages and mail globally, is the way it affects US sellers by allowing their Chinese counterparts to ship packages at considerably lower rates.
However, the US might remain a member of the international organization – if, that is, the UPU accepts Washington’s ultimatum.
The ultimatum is to let the US Postal Service (USPS) determine its own rates for packages arriving in the US from China – otherwise, the deadline for withdrawing from the UPU is October 17.
Users of the system received a notification informing them that international Global Expedited Package Services (GEPS) contracts will end on September 30th.
This means that China-based sellers shipping packages arriving in the US using ePacket as the shipping method will be paying the same rates as US sellers.
ePacket is a service that has greatly facilitated the ability of the booming Chinese manufacturing industry to sell abroad by substantially shortening delivery times. In the past, those unwilling to wait two or more months for their products to arrive from China would have had to pay more to get them from US sellers.
By cutting delivery time to around a month, ePacket carved out a market for itself as a popular way to ship from China.
But now, as shipping rates – sometimes as low as one dollar – look set to be equalized with domestic ones in the US, this advantage will no longer be there.
Whether the US leaves the UPU, or the agency accepts its demands – there soon will be no more cheap Chinese shipping.
Many US-based sellers will recognize that this will be great news for US sellers – and at the same time, bad news for Chinese online retailers like AliExpress.
However, upon closer inspection, the decision to hike up Chinese shipping prices doesn’t promise to be equally good news for quite all US-based e-commerce companies.
Larger and established ones, with enough capital and infrastructure to support their business, will undoubtedly benefit from the elimination of Chinese competition that relied on extremely low shipping rates, in addition to selling cheap products.
Supporters of the decision to force higher shipping rates for products arriving from China hope that both consumers and sellers will be better off for it in the long run – the former for buying higher quality products, and the latter for being able to sell more of them.
But small and independent stores whose business model revolves around dropshipping – because they cannot afford bulk imports and storage in the US – are likely to be hit by the development.
The same is true of fledgling entrepreneurs looking for a quick and easy, low barrier-to-entry way to start a business.
Dropshipping refers to sellers who deliver products directly to US customers using ePacket without having any inventory of their own. They list products on Shopify stores or Amazon and make a profit from the difference between the acquisition and selling price.
This has been a low-risk and low-investment opportunity for many US-based small online sellers to start and sustain their e-commerce business. But with the changes in shipping rates that will affect ePacket, all this is coming to an end for those relying on the likes of AliExpress dropshipping.
Dropshipping itself as a business model will still be available to sellers inside the US – but once again, small and independent sellers are at a disadvantage, as Amazon is likely to stand in the way and crush this type of competition – because the giant is capable of delivering products much faster and at lower prices.